WHERE WILL REMY COINTREAU END UP?

Since announcing its plans to sever ties with Maxxium, there has been much speculation as to where Remy Cointreau will end up. UBS analyst Mellissa Earlam views Brown-Forman or Bacardi as the most likely buyers, while also noting that a merger/acquisition is not likely until 2009 (when Remy is scheduled to leave) unless the Maxxium partners release Remy earlier.

As the report suggests, Bacardi is a possibility because the company has exhibited in the past its interest in diversifying its ultra-premium brands (think Grey Goose). Also, the fact that Bacardi is a privately owned company could allow it to pay a higher price than its public counterparts.

Brown-Forman, on the other hand, has shown the desire to further expand its premium brand portfolio, and has been fairly acquisitive this year with the purchase of Chambord Liquer and Herradura tequila.

Remy’s 1st-half earnings conference on December 12 will hopefully provide more insight into the Maxxium departure, so until then we can purely speculate. What’s the strategic rationale for exiting Maxxium? UBS says Remy’s departure will enable the company to focus more strongly on its ultra-premium brand growth by building its own distribution in Asia (especially China). It makes sense for Remy because its portfolio is by far the most premium of the Maxxium partners (V&S, The Edrington Group and Fortune Brands), and it appears the company would like to focus more on its ultra-premium brands and increase distribution. Another possible reason for Remy leaving Maxxium is to beat a potential exit by V&S following its pre-emptive sale by the Swedish government.

UBS estimates that the Maxxium exit cost will range from 100-300 million euros